Lip-Bu Tan became the CEO of Cadence Design Systems, Inc. (NASDAQ:CDNS) in 2009. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.
How Does Lip-Bu Tan's Compensation Compare With Similar Sized Companies?
Our data indicates that Cadence Design Systems, Inc. is worth US$21b, and total annual CEO compensation was reported as US$7.6m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$725k. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
That means Lip-Bu Tan receives fairly typical remuneration for the CEO of a large company. While this data point isn't particularly informative alone, it gains more meaning when considered with business performance.
You can see a visual representation of the CEO compensation at Cadence Design Systems, below.
Is Cadence Design Systems, Inc. Growing?
Over the last three years Cadence Design Systems, Inc. has grown its earnings per share (EPS) by an average of 26% per year (using a line of best fit). In the last year, its revenue is up 11%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. You might want to check this free visual report on analyst forecasts for future earnings.
Has Cadence Design Systems, Inc. Been A Good Investment?
Most shareholders would probably be pleased with Cadence Design Systems, Inc. for providing a total return of 184% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
Lip-Bu Tan is paid around the same as most CEOs of large companies.
The company is growing earnings per share and total shareholder returns have been pleasing. Indeed, many might consider the pay rather modest, given the solid company performance! Whatever your view on compensation, you might want to check if insiders are buying or selling Cadence Design Systems shares (free trial).
Important note: Cadence Design Systems may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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